Warehousing woes plagued by several missteps

Like many other technology initiatives, insurance carriers took their cue for data warehousing from financial institutions. Several years ago, banks began to dabble in warehousing campaigns geared to enhance strategy.As many carriers now begin to explore the marketing of bank products and services, they too are faced with the task of improving their cross-selling abilities via warehousing. But if history serves as an indication, they have their work cut out for them.

A report by Hartford, Conn.-based Conning & Co. chronicles numerous warehousing failures. The report, "Data Warehousing and Mining in the Insurance Industry: Floods of Information, Fountains of Knowledge," states that as many as 90% of all insurance-related warehousing initiatives have ultimately proven unsuccessful.

Citing confidentiality, Conning would not divulge the names of the 40 or more carriers that participated in the study. But the firm isn't shy about listing specific problems. "Building a data warehouse is an expensive, time-consuming undertaking that diverts focus away from equally important and more immediate tactical issues of short-term profitability and revenue growth," Jack Gohsler, senior vice president for Conning, explains. "Few executives can afford to think 18 to 24 months into the future."

With a deferred return on investment staring them in the face, carriers haven't hesitated to jettison already-begun programs in favor of investments that appease stockholders, says Kimberly Harris, a senior analyst with Gartner Financial Services Inc., Durham, N.C.

"A lot of the carriers put warehousing on the back burner to concentrate on compelling front-end Web projects that have a quicker payback," Harris adds. What's more, carriers can inconspicuously dump warehousing projects and move on with day-to-day operations without skipping a beat, Gohsler notes.

One industry analyst who did not want to be named reveals that Novato, Calif.-based Fireman's Fund Insurance Co. is one of many warehousing casualties among large carriers. "They invested huge expenses into it only to cut it off in midstream," he says. Fireman's Fund declined to discuss the specifics.

Another chronic problem involves approach. "Building a data warehouse is not something that an IT department can simply go off and do on its own," Gohsler says. "To be successful, key staff throughout the organization must commit a reasonable amount of time to it."